Air Freight Forwarders Caned in Court as European Court of Justice Denies Appeal

EUROPE – The European Court of Justice has upheld a decision by the European Commission to impose fines totalling €169 million on several international air freight forwarders for their participation in various agreements and concerted practices in the air cargo sector, between 2002 and 2007. The EC originally made a decision to penalise the long list of forwarders for their respective roles in several cartels in March 2012, but a number of the companies concerned brought actions before the General Court for the annulment of the Commission’s decision or for a reduction in their respective fines. The appeal was dismissed and the fines also upheld for the most part.

In its judgments of 29 February 2016, the General Court upheld the amount of the fines imposed on Kuehne + Nagel International, Schenker, Deutsche Bahn and Others, Panalpina World Transport (Holding), Ceva Freight (UK) and EGL. Those companies, with the exception of Ceva Freight (UK) and EGL, brought an appeal before the Court of Justice asking that the General Court’s judgments be set aside.

The Court of Justice has now rejected all the arguments put forward by the companies and upheld the amount of the fines imposed. It declared in particular that the General Court was correct in holding that it is appropriate to base the calculation of the amount of the fines on the value of sales associated with freight forwarding services as a package of services on the trade routes concerned.

The Commission held that the anti-competitive conduct of the companies, which agreed on the fixing of various pricing mechanisms and surcharges, gave rise to four distinct cartels:

The ‘new export system’ (NES) cartel, also known as the ‘Gardening Club’ for their use of vegetables as code names, concerned a pre-clearance system for exports from the UK to countries outside the European Economic Area, which was introduced by the UK authorities in 2002. A group of freight forwarders agreed to introduce a surcharge for NES declarations.

New Export System Cartel

EC Fine (€)

Leniency

Decision of the General Court/Court of Justice

Ceva Freight (UK) and EGL

2,094,000

35%

Fine upheld by the General Court

No Appeal before Court of Justice

Kuehne + Nagel International, Kuehne + Nagel (UK )

5,320,000

-

Appeal Dismissed

Fine Upheald

Schenker (UK) as an Economic successor of Bax Global

3,673,000

-

Appeal Dismissed

Fine Upheld

DHL GLobal Forwarding (UK) and Deutsche Post

0

100%

-

Exel Freight Management (UK) Exel Limited

0

100%

-

The ‘advanced manifest system’ (AMS), introduced after the terrorist attacks of 11 September 2001, describes legislative provisions of the United States customs authorities that require companies to submit in advance data on goods that they intend to ship to the United States. A number of freight forwarders coordinated the introduction of a surcharge applicable to the AMS service, for the electronic communication of the data concerned to the United States authorities.

The ‘currency adjustment factor’ (CAF) cartel was designed to achieve agreement on a common tariff strategy in order to deal with a risk of a fall in profits owing to the decision of the People’s Bank of China in 2005 that it would no longer peg the Chinese currency (renminbi or RMB) to the United States dollar. A number of international freight forwarders decided to convert all contracts with their customers into renminbi and to introduce a CAF surcharge, setting the amount.

Currency Adjustment Factor Cartel

EC Fine (€)

Leniency

Decision of the General Court/Court of Justice

UPS SCS (China) and United Parcel Service

3,916,000

-

-

Panalpina China and Panalpina World Transport

3,251,000

-

Appeal Dismissed

Fine Upheld

Schenker China and Deutsche Bahn

3,071,000

20%

Appeal Dismissed

Fine Upheld

Schenker China (as an economic successot of BAX Global (China))

2,444,000

20%

Appeal Dismissed

Fine Upheld

Ceva Freight Shanghai and EGL

935,000

50%

-

Nippon Express (China)

812,000

-

-

Beijing Kintetsu World Express

623,000

-

-

Kuehne + Nagel (Shanghai), and Kuehne + Nagel International

451,000

-

Appeal Dismissed

Fine Uphead

Yusen Shenda Air and Sea Service (Shanghai)

319,000

5%

-

DHL Global Forwarding (China)

0

100%

-

DHL Logistics (China)

0

100%

-

Last, the ‘peak season surcharge’ (PSS) cartel concerned an agreement between a number of international freight forwarders relating to the application of a temporary rate adjustment factor. That factor was imposed as a reaction to increased demand in the air freight forwarding sector at certain times, which led to a shortage of transportation capacity and an increase in transport rates. The agreement was designed to protect the freight forwarders’ margins.